Modulus Alternatives Settles SEBI Case for ₹10.88 Lakh

Modulus Alternatives Investment Managers Ltd has reached a settlement with the Securities and Exchange Board of India (SEBI), paying ₹10.88 lakh to resolve proceedings. This settlement addresses alleged non-compliance with the continuing interest requirements for alternative investment fund (AIF) managers.

The issue stemmed from the India Credit Opportunities Fund II, a Category II AIF managed by Modulus Alternatives Investment Managers. SEBI’s examination of the fund’s quarterly activity reports revealed discrepancies in capital drawdowns.

Understanding the AIF Compliance Breach

SEBI observed that the investment manager’s capital drawdowns were not executed on a pro-rata basis, meaning they did not align with drawdowns made by other investors. This action constituted a breach of Regulation 10(d) of the SEBI (Alternative Investment Funds) Regulations, 2012, alongside relevant sections of SEBI’s Master Circular for Alternative Investment Funds.

The regulator identified a consistent lag in Modulus’s cumulative drawdowns compared to other investors over a specific period. This directly violated the prescribed continuing interest requirement for AIF managers.

The Drawdown Discrepancy Timeline

• The period of lagging drawdowns spanned from 24 August 2023 to 27 March 2025.
• By October 2024, other investors had drawn down 80.69% of their commitments.
• In contrast, Modulus had only drawn 40% of its committed capital by October 2024.
• The remaining ₹3 crore of Modulus’s commitment was drawn on 27 March 2025, bringing its total drawdown to 100%.

SEBI concluded that Modulus Alternatives Investment Managers remained in breach of the continuing interest requirement until the non-compliance was rectified during the quarter ending March 2025. The company subsequently filed a suo motu settlement application under the SEBI (Settlement Proceedings) Regulations, 2018.

Settlement Approval and Conditions

Following discussions before SEBI’s internal committee (IC) and consideration by its high-powered advisory committee (HPAC), the regulator approved the settlement. The IC determined the settlement amount of ₹10.88 lakh, which Modulus accepted and remitted.

Under the terms of the settlement order, SEBI will not initiate further enforcement action against Modulus Alternatives Investment Managers for these alleged violations. However, SEBI retains the right to reopen the matter if any representations made during the settlement process are found to be false, if settlement conditions are breached, or if any new discrepancies emerge.